Newbie investor with very basic questions
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Thread: Newbie investor with very basic questions

  1. #1
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    Newbie investor with very basic questions

    Hi I'm a newbie investor interesting in purchasing mutual funds for growth towards retirement in 20 odd years.
    I'm looking to have as hands off approach as much as possible, hence mutual funds.

    1. For say 100K, how many different mutual fund companies should be invested in for basic/minimum diversification?
    2. Does the answer change if it's 200K?
    3. Any opinions on MAW104 Mawer Balanced Fund and its MER .94?
    4. Any suggestion on other mutual funds?

    Thank you kindly for any advice, it is much appreciated.


  2. #2
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    Try looking at etfs instead of mutual funds...same idea, less mer, so you make more money.
    I'm not JustAGuy (without spaces), or Donald, or <insert name here>.

  3. #3
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    Simple answer. MAW104 for everything. It is a 'all in one' answer. Seriously.... Answer really does not need to change for $100k or $1000k.

    If you are thinking mutual funds, Mawer is one of the best for actively managed mutual funds. Steadyhand and/or Tangeine are a few other options.

    But you should consider TD e-series index mutual funds with their low MERs. They can be bought with an online account.... or a TDDI brokerage account. You only need 4 funds. Cdn equity, US equity, Int'l equity and Cdn bond. That said, if you are into having a discount brokerage account, e.g. with TDDI, with $100k, you can do the same thing with even lower cost ETFs (purchased on the stock market). You can do it with 3 funds.... VCN (Cdn equity), VXC (or XAW) for US and Int'l, and VAB (Cdn bond). Using low cost ETFs is even more effective the more money you have....whether $100k, $1000k, or $5000k.

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  5. #4
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    Thank you so much for the input and recommended ETFs! This was much appreciated and highly informative.

    I have done a bit of research on Index ETFs and am trying to understanding how to evaluate *MAW104 Balanced Mutual Fund* versus a portfolio of (VCN Cdn Equity, VXC US/Intl Equity and VAC Cdn Bond). Maybe I'll buy all 4 anyways but:

    1. If I was to buy MAW104, should I be super concerned with timing my purchase in terms of the purchase price? It's at its highest price in one year it seems.

    2. Same question from #1 for Index ETFs

    3. Am I supposed to watch the market and time my sale of my above portfolio of Index ETFs or is it long term like a mutual fund, like don't touch it for 5 yrs type thing?

    Basically I want to not sell or time anything as much as possible until retirement (in terms of type of investor I am).

    3. Would something like a MAW104 Balanced Mutual Fund generally have a higher return than the above portfolio of Index Cdn, US/Intl, Bond ETF bc mutual funds have an active manager who is actively trading/looking for good stocks with high return potential?

    4. How can I find out the return since inception of an Index Fund like VCN on morningstar?

    quote.morningstar.ca/quicktakes/ETF/etf_ca.aspx?t=VCN&culture=en-CA&region=CAN

    I dont know where to look....

    For MAW104 for example, I can see the 'Since Inception Return' has been 8.6% but I don't see this field on the Index ETF VCN to compare

    quote.morningstar.ca/quicktakes/Fund/f_ca.aspx?t=0P0000714D&region=CAN&culture=en-CA

    5. What is a realistic return to aim for an investor who doesn't want to actively trade but just wants to buy a handful max of mutual funds/ETFs? Is 10% too high an expectation? Within a 5 yr or so long term range, what is the minimum return threshold that should cause me to consider ditching my mutual fund and buying another?


    Thank you kindly again for any input on my newbie, minimal research/hands-off/investor type questions.

  6. #5
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    You may want to consider checking out canadiancouchpotato.com and working your way from left to right across the top bar of links (at least the first 4 anyway). That should give you an idea of what index investing for retirement entails, as well as some model portfolios and historic returns.

    IMO avoid the articles unless you're looking for specific info on something.

    You'll notice in the FAQ they recommend mutual funds if you have less than 50k to invest and ETFs if you have more than 50k. This is their (arbitrary) breaking point where the cost of owning a mutual fund (higher MER - no cost to purchase) outweighs the cost of ETFs (lower MER - typically $10 per transaction at a discount brokerage) so the amount you have to invest *can* affect what you invest in if you really want to min/max your portfolio.

    Regarding Vanguard ETF performance - https://www.vanguardcanada.ca/individual/etfs.htm
    Last edited by Jerm; 2017-05-15 at 10:47 PM.

  7. #6
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    Thanks Jerm! I will go directly to the fund site for returns going forward. I see now from the returns (and low costs as everyone's been saying) why ETF Indexes are highly recommended

    Thx for the recommended couch potato site also, I am gaining a better understanding of mutual funds cons.

  8. #7
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    Returns of any entity, mutual fund, or ETF, from inception is a bad indicator simply because they all have different start dates!!! I would look at 5 and 10 year returns, and if you are lucky 20 year returns to compare products, but you won't find 10 year returns for VCN for example....simply because it hasn't been around that long... BUT because it is based on an 'all cap' index, e.g. like the TSX300 Composite, a proxy for VCN would be XIC from Blackrock. Essentially the same thing.

    Generally speaking, broad market index ETFs will be your best choices mostly because of lower MERs and less turnover. You can do all the research you like, but the TSX300 Composite pretty much behaves the same as the TSX60 (60 large caps) and in the USA, the Total Market index pretty much tracks the S&P500. There is just not enough difference in the decimal points on performance returns to make a lot of difference.

    If you are buying for the long haul, e.g. 10-20-30 years, to retirement, it does not make much sense to try and time the market. Five years from now, you won't even remember if you bought high, or in the middle, or in a market pullback. Some people (and I can subscribe to it) will suggest that you invest 50% now and 50% in 3-6 months just in case there is a big market dip within the next 6 months. This helps alleviate buyer's regret of having bought 'high' now, and buyer's regret can sometimes cause heartburn, despondency, sleepless nights and unnatural behaviour. The odds are perhaps 50/50 that the market will be higher 6 months from now, rather than lower...but it seems people have more angst over buying high than missing an opportunity to have bought earlier, i.e. now. You have to decide what your own temperment is.

  9. #8
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    Thank you AltaRed for your insights and esp for the 3rd paragraph, that's super helpful!!

  10. #9
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    If you buy at the top of the market and a crash happens it's gut wrenching.

    On the other hand if you can buy on a dip or correction and it recovers the next dip or correction will not likely put you in a loss situation. This makes staying in the market easy.

    If you can discipline your self to buy on corrections.

    I would spread your money over a year and buy steady every month and if you get lucky and hit a correction buy hard.

  11. #10
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    10% is way too high of an expectation for a return on a balanced portfolio. And like you said, things are near a high, whether you expect a crash or not, expecting 10% over the next few years just is not likely.

    Anyway your question about 5 year range and return threshold to consider ditching your mutual fund... uggh. That is pure returns chasing and very deadly to your growth. If you purchase a mutual fund, and it's underperforming the market after 5 years (regardless of what the returns are) then you should try to look at it, and understand why it's underperforming? Is it bad stock picking? Or are you comparing against the wrong index? Or is it overweight in a sector that is at a low.

    You don't want to hold on to a "bad fund", but the biggest mistake people make in investing is jumping from one fund that is at a low to another one that is at a high, and implicitly using a buy high, sell low strategy.


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